Why I Like to “Shorten” My Trade (You Will Too)

Last week I loaded you up with information on options timing: the factors that go in to the pricing of an option, what cycles options have, and the option Greeks that determine the premium.

I hope that one didn’t leave your head spinning!

This timing stuff is important if you’re going to put the power of options to work for you.

Now I want to reveal my favorite timing strategy – one I’ve used for over 25 years to “ring the cash register,” and one you can start using right away.

If you’re feeling uncertain about any of this timing, you can always follow along with the “money doublers” I show you here occasionally, or trade along with my Money Calendar Alert subscription service if you’re a member there.

But if you’re a do-it-yourselfer or just the type of person who likes to drill down and see how things work – you’ll love today’s lesson.

Here’s why I like to “shorten” my trade timeframe…

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This Market Shape Is More Telling than a “Death Cross”

The major U.S. indices open today right about where they started the month of August.

The Dow has lost -0.85%.

The S&P 500 is down just -0.09%.

The Nasdaq gave back -0.84%.

If you are a straight “buy and hold” equity investor, you probably haven’t made too much money this month. But if you’re an options trader, you could be taking profits all along the way, like we have!

So what’s the rest of the month have in store for us?

If you love technical analysis as much as I do, it probably has not escaped you that the Dow Jones Industrial Average shows what is known as a “death cross.” (Click here for a closer look at that.)

That’s a trading term for when the 50-day Simple Moving Average (SMA) crosses below the 200-day SMA, as it did last week, on August 10.

A death cross gives an indication of some weakness in the average.

However, its meaning isn’t as clear cut as you might think. Will it mean lower prices? Or will it simply be a short-term cross that will rectify itself as prices go higher, eventually bringing the 50-day SMA back above the 200-day SMA? Only time will tell.

I’m looking at this shape instead…

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